THE VALIDITY OF AN ARBITRATION AGREEMENT
The issue of the validity of a commercial arbitration agreement, once established within a contract, is closely related to the principle of independence of such an agreement.
Pursuant to the Law on Commercial Arbitration 2010:
Article 19. Independence of the Arbitration Agreement
The arbitration agreement shall be independent from the underlying contract. Any modification, extension, termination, invalidity, or non-performance of the contract shall not affect the validity of the arbitration agreement.
From the above, it is evident that the arbitration agreement enjoys absolute independence. That is, once parties agree to arbitration, such agreement may be incorporated as a clause within the main contract or may exist as a separate agreement. Regardless of whether it is an embedded clause or a standalone agreement, it retains its independent nature.
However, this independence is still subject to certain constraints, particularly regarding the form requirements under Article 16 and invalidity grounds under Article 18 of the 2010 Law on Commercial Arbitration.
Based on the independence principle stipulated in Article 19, even when the underlying contract is modified, extended, terminated, declared invalid, or becomes unenforceable, the arbitration agreement shall remain valid.
Accordingly, the arbitration agreement continues to govern the commercial contract for which it was agreed as a dispute resolution mechanism. This may come as a surprise, as under traditional legal logic, once a contract is rendered invalid, all provisions derived from it would also become invalid. While this is generally correct, an exception must be made for the arbitration agreement.
It is important to note that in certain cases, the cause of invalidity of the main contract may also result in the arbitration agreement being invalid.
Example: Where the party entering into the contract lacks legal capacity, that party would likewise lack the legal capacity to conclude an arbitration agreement.
Nonetheless, such a situation represents a coincidence in the grounds for invalidity of both the main contract and the arbitration agreement, rather than the invalidity of the contract automatically rendering the arbitration agreement invalid.